Question 1

When the percentage change in quantity demanded is less than the percentage change in price thatbrought it about, demand is said to be

Accepted Answer

A)  unit elastic. 
B)  zero elastic. 
C)  unelastic. 
D)  inelastic. 
E)  elastic. 
A)  unit elastic. 
B)  zero elastic. 
C)  unelastic. 
D)  inelastic. 
E)  elastic.

Question 2

Normal goods

Accepted Answer

A)  have positive income elasticity of demand. 
B)  have negative income elasticity of demand. 
C)  have negative elasticity of supply. 
D)  are sometimes also inferior goods. 
E)  do not have elasticity of demand. 
A)  have positive income elasticity of demand. 
B)  have negative income elasticity of demand. 
C)  have negative elasticity of supply. 
D)  are sometimes also inferior goods. 
E)  do not have elasticity of demand.

Question 3

An inferior good has

Accepted Answer

A)  a positive income elasticity of demand. 
B)  a positive income elasticity of demand and a price elasticity of demand greater than 1. 
C)  an income elasticity of demand greater than zero but less than 1. 
D)  a negative income elasticity of demand. 
E)  a negative price elasticity of demand. 
A)  a positive income elasticity of demand. 
B)  a positive income elasticity of demand and a price elasticity of demand greater than 1. 
C)  an income elasticity of demand greater than zero but less than 1. 
D)  a negative income elasticity of demand. 
E)  a negative price elasticity of demand.

Question 4

If a product's income elasticity is -3.4, then we can conclude that

Accepted Answer

A)  an increase in income will lead to an increase in demand for the product. 
B)  the product is a normal good. 
C)  the product is certainly a necessity. 
D)  the product has a rising income-consumption curve. 
E)  a decrease in income will lead to an increase in demand for the product. 
A)  an increase in income will lead to an increase in demand for the product. 
B)  the product is a normal good. 
C)  the product is certainly a necessity. 
D)  the product has a rising income-consumption curve. 
E)  a decrease in income will lead to an increase in demand for the product.

Question 5

Consider two demand curves and the same price change for both. If the resulting percentagechange in quantity demanded is greater for one (D1) than the other (D2), we can conclude

Accepted Answer

A)  that D1 is elastic and D2 is inelastic. 
B)  that D2 is more elastic than D1. 
C)  that D1 is inelastic and D2 is elastic. 
D)  that D1 is more elastic than D2. 
E)  nothing about their relative elasticities. 
A)  that D1 is elastic and D2 is inelastic. 
B)  that D2 is more elastic than D1. 
C)  that D1 is inelastic and D2 is elastic. 
D)  that D1 is more elastic than D2. 
E)  nothing about their relative elasticities.

Question 6

The table below shows the demand schedule for museum admissions in a small city.   TABLE 4-1
-Refer to Table 4-1. Between the prices of $4 and $6 the price elasticity of demand is

Accepted Answer

A)  0.40. 
B)  1.40. 
C)  1.00. 
D)  0.50. 
E)  0.71. 
A)  0.40. 
B)  1.40. 
C)  1.00. 
D)  0.50. 
E)  0.71.

Question 7

Suppose you are advising the government on changes in the gasoline market. The current price is$1.00 per litre and the quantity demanded is 2.5 million litres per day. Short-run price elasticity ofdemand is constant at 0.3. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the short run by

Accepted Answer

A)  13.3 percent, and total expenditure will rise. 
B)  50 percent , and total expenditure will fall. 
C)  15 percent, and total expenditure will fall. 
D)  12 percent, and total expenditure will rise. 
E)  15 percent, and total expenditure will rise. 
A)  13.3 percent, and total expenditure will rise. 
B)  50 percent , and total expenditure will fall. 
C)  15 percent, and total expenditure will fall. 
D)  12 percent, and total expenditure will rise. 
E)  15 percent, and total expenditure will rise.

Question 8

If the total expenditure on photocopiers increases when the price of photocopiers rises, the priceelasticity of demand is

Accepted Answer

A)  not determinable from the information given. 
B)  less than one (demand is inelastic). 
C)  greater than one (demand is elastic). 
D)  exactly zero. 
E)  equal to one (demand is unit elastic). 
A)  not determinable from the information given. 
B)  less than one (demand is inelastic). 
C)  greater than one (demand is elastic). 
D)  exactly zero. 
E)  equal to one (demand is unit elastic).

Question 9

Price elasticity of demand

Accepted Answer

A)  usually increases over time. 
B)  is greater than one if the percentage increase in the commodity's price is greater than the percentage decline in quantity demanded. 
C)  is higher for an entire group of related products than it is for a particular product in that group. 
D)  is very small when good substitutes are readily available for the commodity. 
E)  is a positive number because price and quantity demanded move in the same direction. 
A)  usually increases over time. 
B)  is greater than one if the percentage increase in the commodity's price is greater than the percentage decline in quantity demanded. 
C)  is higher for an entire group of related products than it is for a particular product in that group. 
D)  is very small when good substitutes are readily available for the commodity. 
E)  is a positive number because price and quantity demanded move in the same direction.

Question 10

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

Accepted Answer

A)  5 percent decrease in quantity demanded. 
B)  50 percent reduction in quantity demanded. 
C)  5 percent increase in quantity demanded. 
D)  0.5 percent decrease in quantity demanded. 
E)  5 percent decrease in total revenues. 
A)  5 percent decrease in quantity demanded. 
B)  50 percent reduction in quantity demanded. 
C)  5 percent increase in quantity demanded. 
D)  0.5 percent decrease in quantity demanded. 
E)  5 percent decrease in total revenues.

Question 11

The imposition of an excise tax usually causes the price paid by consumers to , while theprice received by sellers .

Accepted Answer

A)  fall; remains unchanged 
B)  rise; falls 
C)  rise; rises 
D)  rise; remains unchanged 
E)  fall; falls 
A)  fall; remains unchanged 
B)  rise; falls 
C)  rise; rises 
D)  rise; remains unchanged 
E)  fall; falls

Question 12

We can expect that the income elasticity of demand for gourmet catered meals would bethe income elasticity of demand for meals from a fast-food restaurant.

Accepted Answer

A)  less than 
B)  equivalent to 
C)  higher than 
D)  not comparable to 
E)  lower than 
A)  less than 
B)  equivalent to 
C)  higher than 
D)  not comparable to 
E)  lower than

Question 13

If a producer knew his product to be an inferior good and he also knew average household income was falling, he might

Accepted Answer

A)  close down, because inferior goods are the first to be eliminated from household budgets when income falls. 
B)  keep his output the same. 
C)  increase output because the demand for his product would rise. 
D)  cut output immediately because the demand for his product would surely fall. 
E)  decrease output because the demand for his product would rise. 
A)  close down, because inferior goods are the first to be eliminated from household budgets when income falls. 
B)  keep his output the same. 
C)  increase output because the demand for his product would rise. 
D)  cut output immediately because the demand for his product would surely fall. 
E)  decrease output because the demand for his product would rise.

Question 14

A demand curve that is the shape of a rectangular hyperbola

Accepted Answer

A)  is inelastic over the whole curve. 
B)  has the same elasticity as a straight-line demand curve. 
C)  is elastic over the whole curve. 
D)  has an elasticity of 100 percent over the whole curve. 
E)  is unit elastic over the whole curve. 
A)  is inelastic over the whole curve. 
B)  has the same elasticity as a straight-line demand curve. 
C)  is elastic over the whole curve. 
D)  has an elasticity of 100 percent over the whole curve. 
E)  is unit elastic over the whole curve.

Question 15

Consider the following data for a hypothetical economy.   TABLE 4-4
-Refer to Table 4-4. The income elasticity of demand for transit passes in this economy is

Accepted Answer

A)  2.5. 
B)  3.0 percent. 
C)  0.5. 
D)  2.5 percent. 
E)  0.4. 
A)  2.5. 
B)  3.0 percent. 
C)  0.5. 
D)  2.5 percent. 
E)  0.4.

Question 16

Suppose national income is rising steadily at 2 percent per year over a 5-year period. Over the same time period, suppose quantity demanded for iPods and iPhones increases at 5 percent per year, but no other relevant variables are changing. We can conclude that the income elasticity for these products is and that these products are goods.

Accepted Answer

A)  0.4; inferior 
B)  2.5; luxury 
C)  10.0; necessities 
D)  4.0; necessities 
E)  4.0; normal 
A)  0.4; inferior 
B)  2.5; luxury 
C)  10.0; necessities 
D)  4.0; necessities 
E)  4.0; normal

Question 17

Suppose the supply curve for breakfast cereals is upward sloping. Suppose also that as averagehousehold income increases we observe a fall in the price of breakfast cereal. We can conclude thatbreakfast cereal is a(n)

Accepted Answer

A)  normal good. 
B)  luxury good. 
C)  inferior good. 
D)  substitute good. 
E)  necessity good. 
A)  normal good. 
B)  luxury good. 
C)  inferior good. 
D)  substitute good. 
E)  necessity good.

Question 18

Suppose egg producers succeed in permanently raising the price of their product by 15 percent, and as a result the quantity demanded falls by 15 percent in the short run. In the long run we can expect the quantity demanded to fall by

Accepted Answer

A)  15 percent. 
B)  0 percent. 
C)  between 0 and 15 percent. 
D)  more than 15 percent. 
E)  100 percent. 
A)  15 percent. 
B)  0 percent. 
C)  between 0 and 15 percent. 
D)  more than 15 percent. 
E)  100 percent.

Question 19

If two goods, X and Y, have a negative cross-elasticity of demand, then we know that they

Accepted Answer

A)  each have a price elasticity greater than one. 
B)  are both normal goods. 
C)  are substitutes. 
D)  are complements. 
E)  are both inferior goods. 
A)  each have a price elasticity greater than one. 
B)  are both normal goods. 
C)  are substitutes. 
D)  are complements. 
E)  are both inferior goods.

Question 20

Suppose a market is in equilibrium at price P0, and then an excise tax of t dollars per unit of the good is imposed. At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Accepted Answer

A)  supply; vertical 
B)  demand; horizontal 
C)  demand; vertical 
D)  tax; unit elastic 
E)  supply; horizontal 
A)  supply; vertical 
B)  demand; horizontal 
C)  demand; vertical 
D)  tax; unit elastic 
E)  supply; horizontal

When the percentage change in quantity demanded is less than the percentage change in price thatbrought it about, demand is said to be

Normal goods

An inferior good has

If a product's income elasticity is -3.4, then we can conclude that

Consider two demand curves and the same price change for both. If the resulting percentagechange in quantity demanded is greater for one (D1) than the other (D2), we can conclude

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1. Between the prices of $4 and $6 the price elasticity of demand is

If the total expenditure on photocopiers increases when the price of photocopiers rises, the priceelasticity of demand is

Price elasticity of demand

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

The imposition of an excise tax usually causes the price paid by consumers to , while theprice received by sellers .

We can expect that the income elasticity of demand for gourmet catered meals would bethe income elasticity of demand for meals from a fast-food restaurant.

If a producer knew his product to be an inferior good and he also knew average household income was falling, he might

A demand curve that is the shape of a rectangular hyperbola

Consider the following data for a hypothetical economy. TABLE 4-4 -Refer to Table 4-4. The income elasticity of demand for transit passes in this economy is

Suppose the supply curve for breakfast cereals is upward sloping. Suppose also that as averagehousehold income increases we observe a fall in the price of breakfast cereal. We can conclude thatbreakfast cereal is a(n)

Suppose egg producers succeed in permanently raising the price of their product by 15 percent, and as a result the quantity demanded falls by 15 percent in the short run. In the long run we can expect the quantity demanded to fall by

If two goods, X and Y, have a negative cross-elasticity of demand, then we know that they

Suppose a market is in equilibrium at price P0, and then an excise tax of t dollars per unit of the good is imposed. At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

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Exam 4: Elasticity

When the percentage change in quantity demanded is less than the percentage change in price thatbrought it about, demand is said to be

Normal goods

An inferior good has

If a product's income elasticity is -3.4, then we can conclude that

Consider two demand curves and the same price change for both. If the resulting percentagechange in quantity demanded is greater for one (D1) than the other (D2), we can conclude

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1. Between the prices of $4 and $6 the price elasticity of demand is

If the total expenditure on photocopiers increases when the price of photocopiers rises, the priceelasticity of demand is

Price elasticity of demand

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

The imposition of an excise tax usually causes the price paid by consumers to , while theprice received by sellers .

We can expect that the income elasticity of demand for gourmet catered meals would bethe income elasticity of demand for meals from a fast-food restaurant.

If a producer knew his product to be an inferior good and he also knew average household income was falling, he might

A demand curve that is the shape of a rectangular hyperbola

Consider the following data for a hypothetical economy. TABLE 4-4 -Refer to Table 4-4. The income elasticity of demand for transit passes in this economy is

Suppose the supply curve for breakfast cereals is upward sloping. Suppose also that as averagehousehold income increases we observe a fall in the price of breakfast cereal. We can conclude thatbreakfast cereal is a(n)

Suppose egg producers succeed in permanently raising the price of their product by 15 percent, and as a result the quantity demanded falls by 15 percent in the short run. In the long run we can expect the quantity demanded to fall by

If two goods, X and Y, have a negative cross-elasticity of demand, then we know that they

Suppose a market is in equilibrium at price P0, and then an excise tax of t dollars per unit of the good is imposed. At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

Filters